11/19/2007 @ 4:00PM

Takeover Talks Touch Up Clarins

Takeover speculation gets better with age when it comes to cosmetics company Clarins.

Shares in
Clarins
jumped 7.7%, or 4.61 euros ($6.76), to 64.51 euros ($94.61), in trading in Paris on Monday, after French weekly La Lettre De L’Expansion pointed to a possible takeover bid from Francois Pinault‘s retail empire
PPR
by the end of the month. Shares in PPR declined 3.50 euros ($5.13), or 2.9%, to 115.78 euros ($169.80).

Although the article did not cite any sources, and despite the rumor’s age, investors still decided to chase the story’s tail. In June, French magazine Challenges reported that Clarins management had informed employee representatives of interest from PPR, its luxury goods rival
LVMH
and beauty specialist
L’Oreal
. At the time, Clarins shares barely budged, but the new press report seems to have freshened up a rather wrinkled story. (See “Luxury Brand Clarins Attracts Suitors”)

PPR refused to comment on the article.

Monday’s edition of La Lettre De L’Expansion did have important details to add to the picture. The report claimed that PPR planned to bring Clarins into its Yves Saint-Laurent beauty portfolio by the end of the month, an arrengement that could threaten the cosmetics company’s 500-strong perfume factory in Strasbourg.

Sanford Bernstein analyst Luca Solca told Forbes.com that a purchase of Clarins would be a sensible way for PPR to build up its beauty division. “This business rationale is to build critical mass and scale economies in a business that is more and more driven in global economic scale,” he said.

Then again, potential bidding rival L’Oreal may not be far behind. The beauty products firm sold 1.5 billion euros’ ($2.2 billion) worth of shares in pharmaceutical company
Sanofi-Aventis
last week, which could come in useful were it to target Clarins’ 2.5 billion euros’ ($3.7 billion) worth of outstanding shares. (See “L’Oreal Sinks Sanofi”)

53-year-old Clarins has been the subject of takeover speculation ever since its founder, Jacques Courtin-Clarins, died in March. Until now, the company has remained strictly a family affair, but some industry observers believe Jacques’ sons Christian and Olivier Courtin-Clarins–at the helm since 2000–might be more open to a sale than was their father.

The company is currently attempting to stem sliding profits, which during the first half of 2007 declined 12.4%, to 36.7 million euros ($53.8 million). Clarins blamed a strong euro, a slump in American demand and “significant” marketing and commercial costs.

PPR is a French company that sells luxury apparel and accessories. Its brands include Gucci, Yves Saint Laurent and Balenciaga.